The French State has implemented new provisions regarding tax exemptions on commercial vessels of at least 15 meters in length, including yachts.
The provisions came into force on the 1st January 2016. These provisions can be found in the Official Bulletin of the Tax-Public Finance of the French Republic (BOI).
New procedure: According to the BOI, merchant vessels are subject to VAT on port rights and some other services. However, merchant vessels with an LOA greater than or equal to 15 meters and which navigate in the deep seas, may be exempt from VAT when they meet the following cumulative conditions:
The vessel needs to be registered as a merchant ship on a commercial register (for ships flying a foreign flag it is understood the acknowledgement by the foreign authority that a particular vessel is assigned to a commercial activity satisfies this requirement);
The vessel needs to have a permanent crew on board; The vessel is assigned to the needs of a commercial activity; and The vessel should carry out at least 70% of her trading outside the French territorial waters during the previous year (from the 1st January to 31st December).
The French Administration has given some guidance as to the last condition stating that the 70% results from, on the one hand, the relation between the number of trips in which the vessel travels out of the territorial waters during a single calendar year and, on the other hand, all the trips during the same period.
As such, when the amount of trips out of territorial waters amount to more than 70% within the previous calendar year the vessel will be entitled to VAT exemption for the next calendar year. If this percentage is below 70%, then any exemption previously granted will cease for the following year.
For vessels performing specific activities (for example vessels employed in the tanker trade), the percentage of trade carried outside territorial waters can be determined from the average number of trips made during the last five years.
It should be noted that this percentage is determined by the vessel operators who are accountable for the declaration.
According to the new measures, ship operators will have to provide the French Port Authorities with a new certificate stating that the vessel fulfils the above conditions while committing to pay the tax should the conditions of the exemption prove to have been unfulfilled.